Economic downturns typically mean layoffs and cutbacks for companies, but for law firms involved in bankruptcy work, they can be a goldmine.
Many law firms have stepped up their efforts to build out their bankruptcy and restructuring practices as they anticipate plenty of this work if a projected economic downturn comes to pass.
The battle for bankruptcy talent is already heating up with some major lateral hires in the space over recent weeks.
These law firms are looking to find the right of balance of bankruptcy lawyers, and competition is tough, given a relatively small pool of talent and the ebb and flow of this type of work.
“There’s this strong feeling that there’s another wave of restructurings coming, and we wanted to be well positioned to increase our market share,” said David Feldman, co-chair of the international business restructuring and reorganization practice group at Gibson, Dunn & Crutcher, which has recently grabbed laterals from competitors.
Change in Competition
The bankruptcy and restructuring space has “always been competitive,” said Jeffrey Reisner, who has worked in bankruptcy for nearly three decades, but over time he’s seen changes.
When he began practicing, much of the bankruptcy field on the debtor side was dominated by prestigious bankruptcy boutiques, many of whom no longer exist. Even before that, major law firms didn’t even touch bankruptcy.
“There’s a decent amount of competition like there always was, it’s just changed now to go up market,” Reisner said.
Reisner made the move from Irell & Manella, where he led its bankruptcy practice, to McDermott Will & Emery in September to co-lead its restructuring and insolvency practice.
In recent weeks, several Big Law firms have added to their bankruptcy and restructuring ranks. McDermott hired Reisner along with Skadden, Arps, Slate, Meagher & Flom’s Felicia Gerber Perlman as new co-chairs of its restructuring and insolvency group. The firm also added King & Spalding partner Bradley Giordano.
Hogan Lovells got into the game by hiring former Delaware Bankruptcy Court Judge Kevin Carey. Debevoise & Plimpton added Sidney Levinson, the head of Jones Day’s New York bankruptcy practice, as the co-head of its restructuring group.
Gibson Dunn also tapped Jones Day for talent, picking up three of its restructuring lawyers, including Scott Greenberg, the former co-head of its practice in New York.
“A lot of people are thinking that there is going to be another wave of restructuring and are thinking about whether they’re best positioned to capitalize on that opportunity at their current firm or is there another platform that’s better,” said David Feldman, co-chair of Gibson Dunn’s international business restructuring and reorganization practice group.
Feldman himself has fielded phone calls from eager headhunters looking to recruit him to other firms, but he said he’s quite content in his current role.
The demand for top restructuring lawyers will increase when law firms see evidence of the next recession, but the talent pool of high-quality bankruptcy lawyers is limited meaning practices can only grow so large, and competition for the best lawyers could get fierce.
Thanks to a longer than average strong economic cycle, law firms haven’t had much bankruptcy work to do over the last 10 years, said Reisner. So there’s not a very ready crop of younger lawyers that have experience in the space, he said.
“I think firms will try very hard to staff up, try very hard to get the right people, try hard to bring their people along, but it will take time,” he added.
Slow Build Up
On the other hand, firms have had more time to consider how to prepare for a recession than they did in 2008.
Kent Zimmermann, a legal consultant with the Zeughauser Group, said that while the last recession happened quickly, a decade of a strong economic cycle has given firms a chance to prepare by recruiting and building out their talent in a way they couldn’t ten years ago.
“This time feels different in the sense that there feels like there’s a big lead up to a potential slowdown,” he said.
Major, Lindsey & Africa partner Lawrence Mullman said that, as a recruiter, he’s seen demand grow over the past three to four months for bankruptcy partners as well as a big demand for associates.
While the partners can theoretically assign the work and supervise it, “they just need more people to do the work,” he said.